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The Year in Biopharma: 2015 Roundup

Date: 28 January 2016

With 2016 in full swing, we take a look back at the activity that shaped the Biopharma industry over the last 12 months. These key trends had a significant effect on the sector in 2015 and are likely to impact it further over the coming year.

M&A activity increased

Whilst 2014 represented a record-breaking year for M&A activity in the pharmaceutical sector, with $234 billion in acquisitions recorded (triple that of 2013), 2015 saw an even larger increase with deals reaching a combined total of more than $605 billion. At the top, Pfizer acquired Allergan for $160 billion. The second largest M&A deal confirmed was Teva’s $41 billion acquisition of Allergan’s generics business.

With Pfizer removing Allergan (a player normally relatively active in M&A) from the market, it is predicted that the momentum of such activity may change in 2016.

"Healthcare M&A deals secured in 2015 reached a combined total of more than $605 billion" – Straits Times

Mass industry consolidation

There is no denying that over the past few quarters, biotech and pharma firms have seen an extraordinary level of consolidation. In the second quarter of 2015 alone, deal activity exceeded the prior quarter by 41% in value and 17% in volume, according to a report from PwC.

A number of factors have been listed as key to driving the trend for industry consolidation, including companies seeking to diversify their drug pipelines, cheap interest rates making consolidation more attractive and changes to regulation in the US.

That said, continued consolidation could lead to problems for the sector, with many companies being acquired despite having few proven assets, as well as a heightening of the already contentious issue of drug prices in the biopharma industry.

Big Pharma teamed with Biotech

Increased M&A activity in 2015 centred on a number of pharma giants teaming up with biotech start-ups. Bloomberg named Celgene as one industry giant helping to drive this trend, as it alone struck 10 licensing deals with biotech firms.

The JP Morgan Healthcare Conference in January 2016 showed that Big Pharma is continuing to strike partnerships with biotech firms, indicating that the trend is set to continue. It is important to note that biotech firms ranging from early to late-stage development have been targeted and major institutions financing these mergers will have their investments scrutinized in the coming months.

FDA approved record number of drugs

The FDA approved more new drugs in 2014 than it had done in the last 20 years combined. Writing for Forbes, Matt Herper noted that the FDA approved 89% of never-before-marketed drugs in 2015.

As an overview, there was a focus for the governing body to approve orphan drug products, drugs for unmet medical needs, and drugs that provide some form of benefit compared to existing medications. This sharp rise in approval rate has been criticized by some who foresee potentially negative outcomes occurring, while the counter argument suggests that more drugs on the market could lead to potential price drops, as a result of increased negotiating power.

"From January to August 2015 the FDA approved 89% of all new chemical entities" – BioMedTracker 

Price hikes damaged the industry

The well-publicised 5,000% price hike of Daraprim from Turing Pharma was just one example of rising drug prices in 2015. Valeant, Mallinckrodt and Horizon Pharma also did the same to varying degrees, raising prices of different drugs between 200% and 1,000%.

Industry leaders defended the practice of price hikes as key to creating more value for shareholders and improving revenue to fund R&D activities. Whilst increasing drug prices can lead to the discovery of new specialty drugs and revolutionary therapies, payers have raised concerns as to the validity of the practice.

Some companies have also been keen to note that new drugs are expensive to study and manufacture, and high prices are therefore validated.

New hepatitis C combos, cancer drugs and Alzheimer’s medications are expected to reach the market in the coming year, meaning pharma companies will be aware of the need to defend any price hikes made in the future considering the backlash experienced in 2015.

IPO activity causing concerns of a biotech bubble

High IPOs for early-stage companies caused concern in the industry that a biotech bubble was forming. Between 2008 and 2011 there were no preclinical or Phase I IPOs made in the US; between 2011 and 2015 a total of 22 reached the public exchange stage.

Between 2005 and 2007, $2.1 billion was raised by R&D-stage emerging therapeutics companies; this is significantly less than the $7 billion raised between 2012 and 2014.

Speculation as to whether the companies securing high IPOs will produce medications of note or reduce pressure on the healthcare system is rife, but professionals speaking at the JP Morgan Healthcare Conference were confident that biotech would remain a safe investment.

"22 preclinical/Phase I IPOs made it to public exchange between 2011 and 2015" – Biotechnology Innovation Organization 

Tech giants looking to healthcare and pharma

A number of life science projects were undertaken by big-name tech companies in 2015. Google is looking to develop drugs under its Google Ventures, Google X and Calico firms. IBM also combined with Medtronic and Apple with Johnson & Johnson to tackle targeted therapies.

Steve Gold, the VP of IBM Watson, noted that technology can go a long way in helping consolidating and analysing data from clinical trials for medical use.

"Technology can help consolidate and analyse data from clinical trials for medical use" – Steve Gold, IBM Watson

Biopharma jobs market changing

Traditional biopharma jobs experienced a change in 2015 with mass M&A activity signifying job cuts owing to consolidation and shifting change in the role of the pharmaceutical rep.

Companies seeking to consolidate resources to create more synergy in lieu of an acquisition cut jobs or sought to restructure the company in 2015 causing upset amongst some professionals; Amgen, for example, cut R&D and manufacturing jobs in light of its acquisition of Onyx Pharma.

For pharmaceutical representatives, payers and government programs saw a gain in power and influence in the drug marketing landscape. As a result, 2015 saw the role of the door-to-door salesperson change. The rep of the future must be able to demonstrate an understanding of the scientific merits of a drug or therapy, and accurately communicate patient-centric and value-based outcomes whilst also acknowledging cost.

Not all looked gloomy for the industry job market, however, with Mercer’s All Industries Total Remuneration Survey predicting life sciences to have the highest projected salary increases for 2016 – the second year in a row.

"Life sciences have the highest projected salary increases for 2016" – Mercer’s All Industries Total Remuneration Survey 

These trends, drawn from BioPharma Dive and FirstWord Pharma, give us an overview of activity from the last 12 months. For further insight on the direction of the life sciences industry in 2016, and the recruitment opportunities it presents, contact EPM Scientific today.

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